2015 (8) TMI 269 - HC - Income Tax

Reopening of assessment - non disposing of the objections raised by the petitioner, raised against the reopening of the assessment/reasons recorded by AO - Held that - The detailed objections were raised against reopening of the assessment on 11.06.2014, the Assessing Officer did not disposed of the same till the assessment order came to be passed under Section 143(3) r/W Section 147 of the Act and has dealt with and disposed of the objections simultaneously while passing the assessment order and that too by a non-speaking order. As observed by the Hon ble Supreme Court in the case of G.K.N. Driveshaft (India) Ltd. (2002 (11) TMI 7 - SUPREME Court ) and Arvind Mills Ltd. (2004 (8) TMI 97 - GUJARAT High CourT), the Assessing Officer is not only under a mandate to dispose of such preliminary objection before proceeding with the assessment, even the Assessing Officer is under a mandate to dispose of such preliminary objections by passing a speaking order. Under the circumstances, the impugned assessment order cannot be sustained and the matter is remanded to the learned Assessing Officer by directing the Assessing Officer to pass a speaking order and to dispose of the objections raised by the petitioner against reopening of the assessment and/or against reasons recorded for reopening of the assessment and thereafter to communicate the outcome of the same to the petitioner and after giving reasonable time to the petitioner to challenge the same before higher Court / Forum, may proceed further with the assessment in respect of the assessment for which such notice has been issued. Impugned assessment order dated 20.03.2015 passed by the Assessing Officer is hereby quashed and set aside and the matter is remitted to the file of the Assessing Officer at the stage of submitting the objections by the petitioner against reopening of the assessment for the AY 2009-10. - Decided in favour of assessee by way of remand.

Summary

Issues:
1. Validity of the notice under Section 148 of the Income Tax Act, 1961 for the assessment year 2009-10.
2. Legality of the assessment order passed under Section 143(3) read with Section 147 of the Act for AY 2009-10.

Analysis:
Issue 1: Validity of Notice under Section 148:
The petitioner, a Cooperative Society engaged in processing oil seeds, challenged the notice dated 26.02.2014 under Section 148 of the Income Tax Act, 1961, for the assessment year 2009-10. The petitioner contended that the Assessing Officer did not dispose of objections against the reopening of the assessment before passing the assessment order on 20.03.2015. This non-speaking order violated the mandatory requirement to address objections before proceeding with the assessment, as per the decisions in G.K.N. Driveshafts (India) Ltd. v. ITO and Arvind Mills Ltd. v. Assistant Commissioner of Wealth Tax. The respondent did not dispute the simultaneous disposal of objections and passing of the assessment order.

Issue 2: Legality of Assessment Order:
The court noted a delay of approximately 9 months between the objections raised on 11.06.2014 and the assessment order dated 20.03.2015. Citing the Supreme Court's guidelines in G.K.N. Driveshafts (India) Ltd., the court emphasized the necessity for the Assessing Officer to pass a speaking order on objections before proceeding with the assessment. Referring to the decision in Garden Finance Ltd. v. Asstt. CIT, the court highlighted the importance of allowing the assessee to challenge objections before completion of reassessment proceedings. The court, following the precedents, found the assessment order to be illegal, arbitrary, and non-compliant with procedural requirements.

Conclusion:
The court quashed and set aside the impugned assessment order dated 20.03.2015 and remitted the matter to the Assessing Officer. The Assessing Officer was directed to pass a speaking order on the objections raised by the petitioner against reopening of the assessment, communicate the outcome, and allow the petitioner reasonable time to challenge the reassessment proceedings if objections are overruled. The court mandated the Assessing Officer to complete this process within two months. The decision was solely based on procedural grounds, and no opinion was expressed on the merits of the case. The Special Civil Application succeeded in part, with no order as to costs.